Federal Communications CommissionDA 02-765

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of:
National Association of Broadcasters and
Association of Local Television Stations
Request for Modification or Clarification of
Broadcast Carriage Rules for Satellite Carriers / )
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DECLARATORY RULING AND ORDER

Adopted: April 4, 2002;Released: April 4, 2002

By the Chief, Media Bureau:

I.INTRODUCTION

1.The Commission received a joint Emergency Petition from the National Association of Broadcasters (“NAB”) and the Association of Local Television Stations (“ALTV”) asking for modification or clarification of the Commission’s rules concerning carriage of local television broadcast stations by satellite carriers pursuant to the Satellite Home Viewer Improvement Act of 1999 (the “SHVIA”).[2] NAB and ALTV ask the Commission to take prompt emergency action to address satellite carriage of certain local television broadcast stations in a manner that requires subscribers to obtain a second satellite dish antenna. The Petition states that one of the satellite carriers subject to the “carry-one, carry-all” requirements, EchoStar Communications Corporation (“EchoStar”), which provides direct broadcast satellite (“DBS”) television products and services through its DISH Network, has placed some, but not all, local stations in particular markets on “wing slot” satellites located over the Atlantic (at 61.5° W.L.) or over the Pacific (at 148° W.L.).[3] As a result, some EchoStar subscribers are required to obtain additional equipment (e.g., a second satellite dish antenna) to receive and view these local stations, although the other local stations (such as network-affiliated stations) offered in the same markets are available on one dish antenna served by satellites that provide service over the continental United States (“CONUS” satellites). NAB and ALTV request that the Commission immediately clarify or amend the rules governing satellite carriage of local television stations (i.e., 47 C.F.R. § 76.66) to specify that carriage of some local stations in a manner that requires subscribers to use a different dish antenna from the antenna used to receive other local stations is discriminatory and does not comport with the SHVIA or the Commission’s orders and rules.

2.After reviewing the record in this proceeding, we do not believe that it is necessary to amend the satellite broadcast carriage rules at this time.[4] There is, therefore, no need to initiate a rulemaking to address the issues raised in the Petition. Nor do we believe it is necessary to adopt an interpretation of the rules that would prohibit the use of a second dish in all cases.[5] We agree with the majority of commenters that the issues raised in the Petition can be resolved by declaratory ruling, pursuant to our authority under Section 1.2.[6] As set forth below, we conclude that EchoStar’s “two-dish plan,” as implemented, violates Section 338(d) of the Act and Section 76.66(i) of the Commission’s rules.[7] Based on numerous reports detailed in this record and referenced below, we find that EchoStar’s offer of a “free” dish has not been implemented as such and, in these instances, constitutes a violation of the statutory and regulatory prohibition of providing access to certain stations at a discriminatory price. In addition, we find that EchoStar does not, as required, retransmit the signal of local television broadcast stations to subscribers on contiguous channels and provide access to local television broadcast station signals in a nondiscriminatory manner on its on-screen program guide or menu. In essence, although it may be possible to offer certain local stations by use of a second antenna without engaging in prohibited conduct, we find that EchoStar has not done so in this case.

II.background

A.Satellite Home Viewer Improvement Act of 1999

3.The SHVIA grants satellite carriers a royalty-free copyright license that enables satellite carriers to make secondary transmissions of a broadcast station’s signal into that station’s local designated market area (“DMA”) without obtaining the authorization of those holding copyrights in the individual programs broadcast by that station.[8] In exchange, the law requires that, by January 1, 2002, if a satellite carrier carries one local broadcast station in a local market pursuant to this license, it must carry all qualified local broadcast stations in the market upon request.[9] This requirement is also known as the “carry one, carry all” rule.[10] Although broadcasters can choose between retransmission consent and mandatory carriage, the SHVIA’s carry one, carry all rule recognizes the practical realities of the television marketplace. As the courts have observed,

[m]ajor network affiliates have bargaining power and will be carried voluntarily in most instances, so they will normally elect to proceed under the retransmission consent provision. In contrast, independent stations (affiliates of emerging networks, independent commercial stations, and noncommercial stations) may need the protection of the must-carry rules and will normally elect mandatory carriage.[11]

Congress sought to ensure that the carry one, carry all rule would prevent satellite carriers from “cherry-picking” (for example, carrying only network affiliates in local markets), but would instead protect the ability of all local broadcasters to reach their audiences and thereby “preserve free television for those not served by satellite or cable systems and . . . promote widespread dissemination of information from a multiplicity of sources.”[12] In a recent decision, the United States Court of Appeals for the Fourth Circuit upheld the constitutionality of the SHVIA and the Commission’s implementing regulations.[13]

4.As directed by Congress, the Commission issued a Report and Order implementing the SHVIA’s broadcast signal carriage requirements.[14] The section of the Report and Order at issue here concerns the Commission’s interpretation of the anti-discrimination language of Section 338(d) of the Act, which states:

No satellite carrier shall be required to provide the signal of a local television broadcast station to subscribers in that station’s local market on any particular channel number or to provide the signals in any particular order, except that the satellite carrier shall retransmit the signal of the local television broadcast stations to subscribers in the stations’ local market on contiguous channels and provide access to such station’s signals at a nondiscriminatory price and in a nondiscriminatory manner on any navigational device, on-screen program guide, or menu.[15]

Specifically with regard to the issue of additional equipment (which several broadcasters raised in the Report and Order), the Commission concluded:

We find that the language of Section 338(d) covers the additional equipment concerns raised by the parties and bars satellite carriers from requiring subscribers to purchase additional equipment when television stations from one market are segregated and carried on separate satellites. However, we are not prohibiting a satellite carrier from requiring a subscriber to pay for an additional dish in order to receive all television stations from a single market. For example, DirecTV may require an additional dish to receive all television stations from the Baltimore market, but it may not require subscribers to purchase the same to receive some Baltimore stations where the others are available using existing equipment.[16]

Similarly, Section 76.66(i)(4) of the Commission’s rules states:

Within a market, no satellite carrier shall provide local-into-local service in a manner that requires subscribers to obtain additional equipment at their own expense or for an additional carrier charge in order to obtain one or more local television broadcast signals if such equipment is not required for the receipt of other local television broadcast signals.[17]

5.The Commission also issued an Order on Reconsideration, which again addressed the issue concerning additional equipment in response to a petition for reconsideration of the Report and Order (filed by DirecTV), which the Commission denied.[18] In the Order on Reconsideration, the Commission clarified that while Congress did not completely prohibit satellite carriers from requiring subscribers to obtain an additional satellite dish antenna, it was clear that Congress would not allow satellite carriers to require an additional dish to receive only some, but not all, local signals, “if such a requirement created discriminatory effects.”[19] The Commission added, “[w]e believe that a limited prohibition on requiring subscribers to obtain a separate dish to receive some local signals when other local signals are available without the separate dish is necessary to give full effect to local station carriage requirements.”[20]

B.EchoStar’s “Two-Dish Plan”

6.EchoStar is currently providing DBS service that includes local television broadcast signals to 36 markets from six satellites located in four orbital slots.[21] Specifically, EchoStar is authorized to provide DBS service from orbital slots located at 61.5°, 110°, 119°, and 148° West longitude.[22] From the 110° and 119° slots, the satellites – referred to as “CONUS satellites” -- are able to provide service to the 48 contiguous United States. The CONUS satellites form the primary satellites in EchoStar’s fleet. The remaining orbital slots, located at 61.5° and 148°, are able effectively to cover only a portion of the United States and are therefore referred to as “partial-CONUS,” “secondary” slots, or “wing slots.”

7.Since January 1, 2002, EchoStar, with very few exceptions, has been using its CONUS satellites to deliver the signals of local broadcast stations affiliated with ABC, CBS, Fox, NBC, UPN, and WB, as well as some PBS and independent stations, to subscribers.[23] No additional equipment is necessary in order to receive these signals, which can be obtained in a package of local signals for $5.99 per month.[24] In contrast, any remaining stations in a market not carried on CONUS satellites are carried on EchoStar’s secondary satellites, operating from 61.5° and 148° W.L. The local stations that EchoStar carries on its secondary satellites tend to be Spanish-language stations, certain noncommercial stations (including public television stations), and independent commercial stations.[25] In order for subscribers to receive these local stations (which EchoStar has characterized as “less popular” stations) from EchoStar’s secondary satellites, subscribers must obtain and install additional equipment, including a second satellite dish.[26] Although EchoStar claims to offer the additional equipment, including installation, to subscribers free of charge, broadcasters have presented evidence to dispute the extent of EchoStar’s efforts in this regard.

8.EchoStar claims that its “must carry compliance plan” hinged on the deployment of two spot-beam satellites supplied by two different manufacturers, Lockheed Martin and Loral Space.[27] It asserts that the manufacturers failed to meet delivery deadlines, which precluded EchoStar from meeting the January 1, 2002, statutory deadline “to carry over 200 additional qualified local broadcast signals.”[28] EchoStar states that its CONUS satellites were “too capacity constrained to carry all qualified local signals,” and that it could not move “existing programming on central satellites to eastern or western satellites without significantly disrupting customer expectations and violating contractual obligations to programmers."[29] It states that it proceeded to carry “roughly half of the additional local must carry station signals on its central satellites,” and placed the remaining local signals on its wing satellites.[30] According to EchoStar, its plan complies with the law because it provides the additional equipment required to receive the signals, including installation, free of charge to any subscriber who requests it.[31]

9.NAB/ALTV, on the other hand, interpret the Commission’s Orders as “preven[ting] satellite carriers from forcing customers to acquire a second dish solely to obtain some local stations, without regard to who pays the out-of-pocket costs of doing so.”[32] Further, NAB/ALTV state that the Commission intended “to permit carriers to require customers to pay for a second dish ‘at their own expense’ if all of the stations in the market were available only through a second dish.”[33] It is NAB/ALTV’s position that “any scheme that forces customers to undertake the burden of acquiring additional equipment to receive some – but not all – local stations is inherently and inevitably discriminatory.”[34] Numerous broadcast stations, programmers, and associations filed comments in support of NAB/ALTV’s petition.[35] Broadcast commenters concur with NAB/ALTV that EchoStar’s practice of placing some – but not all – local stations entitled to carriage on wing satellites is unlawful.[36] Further, several commenters argue that, independent of the alleged violations, EchoStar’s actions are inexcusable given the time it had to prepare to meet its must carry obligations.[37]

10.Broadcast commenters also contend that, even if EchoStar follows through on its commitment to offer the additional equipment free of charge to subscribers, the hassles, inconvenience, and aesthetic costs to consumers of a second dish as they currently are being provided by EchoStar act as a strong deterrent for obtaining one.[38] Among other things, they point out that a consumer must become sufficiently educated to be aware that certain stations are missing and that the option of obtaining a second dish is available. Once a consumer is aware of the missing station, he or she must contact the satellite carrier (and a local installer) to arrange for an installation. In doing so, the consumer must be persistent enough to overcome initial misinformation concerning charges for the dish,[39] installation,[40] or the duration of the offer.[41] Additionally, broadcasters state that there is also the possibility of being required to wait at home for an indefinite period for an installer to show up, of long waits on hold, or of multiple postponements of installer visits, and even of monetary penalties for failing to be home when the installer arrives. Further, a consumer must be willing to accept the aesthetic impact of a second dish, and for many apartment dwellers physical or legal impediments may make a second dish impractical.[42]

11.NAB/ALTV recommend that the Commission “establish a minimum objective criteria for any satellite carrier that purports to justify a two-dish approach by ostensibly offering to pay for a second dish.”[43] They state:

Among other things, the Commission should communicate to the DBS industry that to comply even with EchoStar’s reading of the current FCC rules, (1) the offer of a free second dish must be prominently communicated both to existing customers and to new customers via the carrier’s web site and otherwise, (2) any such offer must include all out-of-pocket costs of purchasing, installing, and hooking up the second dish and any other necessary equipment, (3) the installation must be prompt, and (4) there can be no preconditions for the offer.[44]

NAB/ALTV also request that the Commission establish an early deadline for compliance, and if the carrier claims to be unable to meet that deadline because of circumstances beyond its control (e.g., if a satellite is damaged while being launched), it should be required to seek a formal, temporary waiver from the Commission for good cause shown.[45] NAB/ALTV, in addition to other commenters, express concern that if the Commission does not promptly clarify its rules, then the two-dish approach using the wing slots “may well prove to be a permanent strategy for both DirecTV and EchoStar, whether or not the merger is approved.”[46] Univision and WLNY-TV/Golden Orange, on the other hand, do not completely agree with NAB/ALTV’s recommendation, asking the Commission to reject any suggestion that requiring EchoStar to better publicize the facts surrounding its local station package is an adequate solution to the problems that broadcasters on secondary satellites are facing.[47] Finally, APTS/PBS propose that the second antenna must be installed automatically to any subscriber who signs up for local-into-local service.[48] They add that subscribers who do not want the second antenna could refuse to accept it, provided they are aware that they are paying for more stations than they will receive.

III.DISCUSSION

12.In the factual context we are presented, the record demonstrates that EchoStar’s “two-dish” plan, as implemented, violates both the Act and the Commission’s rules. We note that satellite carriers have long argued for the ability to carry local stations as a way of becoming a more viable competitor to cable television. In acceding to the wishes of the satellite industry for the ability to carry local stations, the Congress, in granting satellite carriers a compulsory license, also sought to ensure that satellite carriers did not discriminate among local stations. Although it may be possible to offer certain local stations by use of a second antenna without engaging in prohibited discriminatory conduct, we find that EchoStar has not done so in this case.

13.In its Opposition, EchoStar begins by arguing that the Commission is barred from dealing with allegations of discrimination relating to acquisition of new equipment altogether, because of certain language in an early draft of the SHVIA.[49] EchoStar states that Congress had considered an outright prohibition on second dishes, but because it was later rejected, Congress must have intended not to limit the use of second dishes in any way. The same legislative history argument has been raised previously and twice rejected by the Commission.[50] We again reject EchoStar’s repeated legislative history argument here. As the Commission explained in the Order on Reconsideration: